Generally, to qualify for the deduction, the child’s doctor must recommend the special school, therapy, or tutoring, and there must be a medical diagnosis of a neurological disorder, such as severe learning disability, made by a medical professional. Transportation expenses to the special school or to the tutor also qualify for a medical expense deduction. If transportation is by car, the allowable expense in 2004 is fourteen cents per mile plus parking and tolls, or the actual cost of operating the vehicle.

Diagnostic evaluations also qualify for a medical expense deduction. This can include testing by a speech-language pathologist, psychologist, neurologist, or other person with professional qualifications.
Note: Expenses claimed as a medical expense deduction and later reimbursed by a school district or insurance company must be reported as taxable income for the year in which the reimbursements are received.

Not everyone who has medical expenses can use them on their tax return. Medical expenses must be claimed on Schedule A, Itemized Deductions, and are subject to certain limitations. First, the family must have itemized deductions that exceed their standard deduction in order to use Schedule A (about 65 percent of taxpayers do not itemize for this reason). Second, medical expenses are allowed as a deduction only to the extent that they exceed 7.5 percent of adjusted gross income, a significant threshold for many families. (See IRS Publication 502, Medical and Dental Expenses.)

Where to Get More Information

The IRS provides free booklets that cover each of the topics listed above. The titles listed below may be ordered by calling the IRS toll-free number: (800) 829-3676. Generally, taxpayers may order up to three copies of any publication or form. The following booklets may be helpful:

• IRS Publication 17: Your Federal Income Tax (a comprehensive 300+ page guide)
   

• IRS Publication 502: Medical and Dental Expenses
   

• IRS Publication 503: Child and Dependent Care Expenses
   

• IRS Publication 501: Exemptions, Standard Deduction and Filing Information
   

• IRS Publication 596: Earned Income Tax Credit
   

• IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans

Extensive information can also be obtained from the IRS. The American Bar Association Section on Taxation contains links to scores of tax related sites.

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